VAT for Dropshippers
As Accountants for Dropshippers, we often get asked questions on the implications of VAT for Dropshippers.
In the interests of saving people time, we thought it would be useful to begin sharing the questions and the answers around dropshipping and VAT for everyone below.
If you have a question that you would like answered then please feel free to use the instant chat facility on the bottom right hand corner of the screen. If you would like to learn about how you can work with us please book a free discovery call here and one of our senior team members will call you back at the selected time.
Dropshipping from outside the EU into the UK - do I need to charge VAT?
Before you can determine whether or not you need to charge VAT on ANY transaction then you need to determine where the place of supply of the goods occurs.
If you are dropshipping from outside of the EU into the UK, then the place of supply is considered to be where the goods are shipped from. In this case the place of supply is outside of the EU, which means VAT is not due on the sale of the goods.
However, just because there is no VAT due on the sale, it does not mean that VAT should be ignored altogether. There may be import VAT due when you ship goods into the UK.
What about Import VAT?
Regardless of whether or not you are dropshipping, whenever goods are imported into the UK from outside the EU (plus who knows what will happen after Brexit!) import VAT and duties will apply on goods valued at above £15.
Import duties and VAT is payable by the importer on record.
If you are dropshipping and your customer is the importer on record then technically the customer is responsible for the import VAT. If your business is the importer on record then your business will be liable to pay the import duties and VAT.
Should I tell my customer that they are the importer on record?
If your customer is the importer on record then they are responsible for paying any import duties and VAT.
Customs and Excise may hold back on releasing goods until the VAT has been paid (they will write to the importer on record to inform them of this and will provide payment instructions). This means that your customers may not receive their goods until they have paid the VAT.
This is obviously a bad customer experience, so we would strongly recommend that you make this clear to your customers when they are pushing from your website.
Accountants for Dropshippers
We are accountants for ecommerce businesses. If you are dropshipper and are worried about the affect of VAT on dropshipping then you can book a free consultation to find out how we can support your business today by clicking here.